The Bounce-Back Effect: Checkmating Competitors with the Cold Hand

Abstract

Purpose: The paper investigates the effect of winning performance streaks (the hot hand) and losing performance streaks (the cold hand) on future performance. Performance streaks have many implications in business settings, such as selecting stocks, hedge fund performance, employee performance, introducing new products, and business strategy. Design/methodology/approach: The paper empirically analyzes the effects of performance steaks. It uses data from world blitz chess championships. Findings: Contrary to some studies in competitive sports, the empirical analysis supports neither the hot hand nor the cold hand hypothesis. Instead, a new effect is discovered; performance increases following a loss. We term this effect to be the bounce-back effect. Research limitation/implications: Future research may conduct field experiments to investigate which business environments are likely to generate this effect. Similar to other studies on performance streaks, the analysis does not control for motivation. Future research may also analyze the role of motivation for performance. Originality/value: The paper identifies a new effect previously not investigated in the literature. In addition, the paper contributes to this literature by looking into competitive blitz chess, where psychological factors are more important than physiological factors. If the bounce-back effect holds more generally in other settings, it might have implications for predicting the performance of employees in competitive business environments.